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TMI Blog1982 (1) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... sment for the other assessment years under appeal. The AAC on page 6 of his impugned order has referred to "account Satish Kapoor" which apparently contradicts what the Income-tax Officer states. As recorded by the ITO in the impugned order for the asst. yr. 1973-74, there were several entries in the name of hosiery manufacturers/dealers. The total of the entries at pages 82 and 83 was Rs. 1,30,915.61. There were also entries at page 94 of the note book and the total thereof was Rs. 25,487. It is a finding of fact given by the ITO that, "it is seen that there are no dates appearing in this account in respect of any of the entries." The ITO also noticed that against certain entries in this account, the word 'cheque" was written and whereas the word 'cash' appeared against certain other entries. The entries were written in the hand of Shri Narinder Nath Bahl. The ITO proceeded to make enquiries in this regard. 3. At the time the ITO was proceeding on the above Lines, the assessments for the assessment years under appeal stood finalised as appearing in the tabulated date below: S. No. Asstt. year Date of Original Section Income assessed 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment orders. The abstract of the statement which he had taken into the body of the assessments as under: "Myself, Shri Abhay Kumar and Shri Satish Kapoor had a proposal to join together for the brokerage business. All three of us brought down details of brokerage income earned in the past years including expected amounts with a view to settle profit sharing ratio. In these details figures of cheques were noted together with expected amounts which were denoted as 'cash'. Q. Did the word 'cash' not actual amount received for brokerage at any time? Ans. No. This was only a symbol to represent figures which everybody wanted to be taken into account on the basis of bits of record and loose papers regarding brokerage deals claimed to have been conducted even though the amounts had not been received as yet. Q. Were these figures mentioned as 'Cash' real or imaginary? Ans. For the purpose of securing greater share in the proposed venture inflated figures could have been introduced." The ITO considered the statement of Shri Bahl as not satisfactory. According to him, "the account itself is essentially of the nature of a secret account. The transactions noted as chequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring all these years and, therefore, the ITO could not draw any adverse inference from the very figures written in a note book found at the residence of another party. The assessee also submitted before the ITO the names of the parties against whom the cash is written and requested that, these parties may be summoned so that the truth of the matter may be ascertained. The ITO, however, for the reasons best known to him, has not mentioned anything about this necessary verification in his impugned orders and this is how the ITO rejected the contentions of the assessee: "Having examined the evidence on record and under the facts and circumstances of the case, it is difficult to accept the assessee's contention as a satisfactory explanation. Every if the case entries did partly represent expected brokerage, the assessee has not been able to furnish full details of the transactions nor he has furnished any corelation of these cash entries with any specific receipts during the subsequent period. As such, it is reasonable to hold that the case entries represent undisclosed brokerage receipts at different times which have not been fully and truly disclosed in the course of original inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponse to notices under s. 148. The reopening of the assessment is, therefore, bad in law. For this proposition, reliance was placed on the ratio decidenti of the following judgments: (i) Karam Chand Kakkar vs. ITO (1974) 93 ITR 198 (Punj); (ii) ITO vs. Lakhmani Mewal Das 1976 CTR (SC) 220 : (1976) 103 ITR 437 (SC); (iii) Ganga Saran Sons P. Ltd. vs. ITO (1981) 22 CTR (SC) 112 : (1981) 130 ITR (SC); and (iv) Vimal Chandra Golecha Ors. vs. ITO (1981) 25 CTR (Raj) 175. 11. On merits, the ld. Counsel for the assessee submitted that the entries had been found in the books of account of another party. The account was by way of notings and not entries in the regular books of account. The account had been explained and owned up by three parties. There was no evidence whatsoever to conclude that the entries represented figures of cash mentioned in that account and were income of the assessee much less the income for the assessment year in which it had been added. It was further submitted that the ITO, at the back of the assessee had enquired from the parties against whose names the figures of cash had been shown and since those parties denied, the ITO kept back the inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons has not been controverted through this issue was specifically projected before the AAC. The AAC has merely stated that the note book was shown to the assessee. After the returns had been filed by the assessee, the assessee was entitled to see the reasons which prompted the ITO to reopen the assessments which had been finalised after due enquiry on this account, the reassessments are bad in law and have to be struck down. 17. It is to be noted that even in the case relied on by the Revenue justifying the reopening of the assessments, the Calcutta High Court has clearly pointed out that. "there must be some grounds for the reasonable belief that there has been non-disclosure or omission to file a true or correct return by the assessee resulting in escapement of assessment or in under-assessment Such belief must be held in good faith and should not be a more pretence or change of opinion on inferential facts or facts extraneous irrelevant to the issue and the material on which the belief is based must have a rational connection or live link or relevant bearing on the formation of the belief. "Now the ITO has reopened the assessments and has not shown the reasons to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stronger than the words" is satisfied". The belief entertained by the ITO must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. From the assessment orders one does not find reason given by the ITO which would satisfy these conditions for reopening of the assessments. In each assessment order all that the ITO has written is that reassessment proceedings were initiated in this case under s. 147(a). There is no observation about the reasons with the ITO to reopen the assessments. Therefore, the contention raised on behalf of the assessee which have not been contradicted are absolutely justified. 19. Even on merits, the additions made have no legs to stand upon. The issue that really arises is whether on the basis of some entries recorded in a note book seized from the premises of a third party, the onus of proof of those entries can be thrown upon the assessee and the failure upon the part of the assessee to do so lead to the additions of the amounts noted therein. It is clear from what has been stated above that the figures of cash were recorded alongwith figures of cheques and parties concerned g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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